IR moves to Bermuda

Shareholders in Mapeley, the Bermudan offshore company that is leasing the Inland Revenue its office space, have made a £23 million tax-free windfall by selling a London tax office.

In a further embarrassing twist, the sale saw the Irish investor who bought the building avoid stamp duty thanks to a loophole that is costing the Treasury billions.

The news will cause acute unease to the Treasury and the Revenue. It is the first blatant example of how the Exchequer stands to lose millions thanks to the outsourcing of 600 tax offices to a company based in a tax haven.

The sale of 11 Belgrave Road in central London was made by a company with the same shareholders as Mapeley. These include George Soros, one of the world's richest men, together with Fortress, a US investment trust, and Delancey, a private UK property company controlled by the Ritblat family.

The consortium bought the building in December 2000 from an Arab investor for £22m after Mapeley was unveiled as the Inland Revenue's preferred bidder. It then increased the Revenue's lease, which had eight years unexpired, to 20 years. This made the building more valuable to investors keen on the security that a Government tenancy offered. Seven months ago, it sold the building for £45m.

The acquisition was through Diamond Ridge, a Bermudan listed company. The Irish investor bought the company and so avoided stamp duty.

Suggestions that Mapeley shareholders might have bought more buildings in this way before they signed its £220m leasing contract with the Revenue have been denied by the company. As Mapeley is based in a tax haven, it is exempt from cap ital gains tax.

Mapeley is locked in negotiations to increase payments that it received from the Revenue. The Treasury Select Committee has castigated the Treasury and the Revenue for allowing Mapeley to win control of 600 properties for 20 years, but so far no heads have rolled.